Employers may be liable to make up for poor tips

I work in a tipped position and make $4.80 an hour, which is below minimum wage, before tips. If the tips I receive do not raise my pay to minimum wage, does the employer need to make up the difference to make my salary minimum wage? If so, what do I need to tell the employer so I get the money due to me?

Isaac P. Hernandez

Hernandez Law Firm

Federal law under the Fair Labor Standards Act allows employers to pay tipped employees an hourly rate that is less than the applicable minimum wage only if certain conditions are met.

Among other things, the FLSA provides that in order for an employee to qualify as a tipped employee, the employee must customarily and regularly receive at least $30 in tips per month, and that the employee must be allowed to retain all tips unless the employer has established a valid tip-pooling arrangement for the employees who customarily and regularly receive tips.

If FLSA requirements for tipped employees are not satisfied, employees must be paid the applicable minimum wage, which currently is $7.80 per hour in Arizona. Employers that fail to satisfy FLSA requirements for tipped employees may be liable for the difference between the reduced hourly rate paid to the employees and the applicable minimum wage.

Similarly, if an employee receiving the reduced hourly rate for tipped employees, $4.80, does not earn sufficient tips in a given seven-day workweek to meet the applicable minimum wage, an employer is required to make up the difference.

Michelle Matheson

Matheson & Matheson

Under both the federal Fair Labor Standards Act and the Arizona Minimum Wage Act, employers may pay employees who customarily and regularly receive tips less than minimum wage in direct wages.

Arizona law, which sets a higher minimum wage than the FLSA, allows employers to pay tipped employees up to $3/hour less than minimum wage. In 2013, the Arizona minimum wage rate increased to $7.80 an hour.

Therefore, your employer must pay you a base wage of at least $4.80 and hour. However, employers are required to make up the difference if your tips combined with the base hourly wage do not equal at least $7.80 an hour.

It appears that your employer is paying you a lawful base wage rate. However, if you are not receiving total compensation of at least $7.80/hour when including your tips, then your employer must compensate you for any applicable underpayment.

You can pursue any underpayments due to you in several ways. If you believe this is an honest error on your employer’s part, you can speak with your manager or human resources representative and ask them to voluntarily remedy the underpayment. Alternatively, you can seek assistance from the Arizona Industrial Commission at ica.state.az.us or the U.S. Department of Labor at dol.gov. Finally, depending on the size of your claim, you may want to seek private legal counsel.

Under Arizona law, an employee who prevails on a minimum-wage claim is entitled to recover any underpaid minimum wages for two years, and in certain cases up to three years.

Damages include the total underpayment with interest, plus a statutory penalty equal to two times the amount of the underpayment, and payment by the employer of the employee’s reasonable attorneys’ fees and court costs.

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